Discussion 5

Answer the 5th question plus 1 more from questions 1–4. Then reply to 1 classmate’s thread.

  1. Tetrangle Manufacturing has fixed costs of $2,160 per day. The firm manufactures bicycle component upgrade kits. The kits have a short-run average variable cost of $48 and are sold for $66 each.
    • What is the break even level of daily output for the firm?
    • What is the degree of operating leverage when daily output is Q = 170?
  2. What is the meaning of economics of scope? How do they differ from economics of scale? Provide examples in your discussion.
  3. Under what condition should a firm continue to produce in the short-run if it incurs losses at the best level of output?
  4. Under what conditions can we be sure that perfect competition leads to a more efficient use of resources than monopoly? How prevalent are these conditions in the real world?
  5. As an employer wants to reduce the production cost during the economic recession, he/she could choose to (1) lay off some workers without changing wages or (2) keep all workers but cut wages for all. Which method would you choose? Why?

Additional information:

  • “Masters, provide your slaves with what is right and fair, because you know that you also have a Master in heaven” (Colossians 4:1, NIV).
  • “Look at the birds of the [a]air, that they do not sow, nor reap nor gather into barns, and yet your heavenly Father feeds them. Are you not worth much more than they?” (Matthew 6:26, NIV).
  • “He who oppresses the poor taunts his Maker, But he who is gracious to the needy honors Him” (Proverbs 14:31, NIV).
  • “…Encouraged by Wall Street investors, many companies over the past decade have slashed their full-time workforces, reduced benefits and demanded more output from the remaining workers…Many workers sense that they’re merely expendable components of an impersonal production process involving the manipulation of employees for the sole objectives of the maximization of profit and shareholder value.” — John Stapleford, Bulls, Bears, and Golden Calves. IVP Academic (p. 104)

Course Textbooks:

Froeb, L. M., McCann, B. T., Ward, M. R., & Shor, M. (2016). Managerial economics: A problem solving approach (4th ed.). Boston, MA: Cengage Learning. ISBN: 9781305259331.

Salvatore, D. (2015). Managerial economics in a global economy (8th ed.). New York, NY: Oxford University Press. ISBN: 9780199397129.